On Monday (July 4), Charlie Erith, Lead Portfolio Manager and CEO at research-driven investment adviser ByteTree Asset Management, wrote about the importance of gold and Bitcoin as hedges against monetary policy errors.
ByteTree, which was founded in 2014, is “a research-driven boutique providing investment solutions and institutional-grade crypto-asset data on Bitcoin and other cryptocurrencies, as well as Gold and Silver, for the digital asset marketplace.”
In a note shared with CryptoGlobe, the ByteTree CEO said:
“At ByteTree, we believe that gold and bitcoin will be important components of an investment portfolio for years to come. Not because they are guaranteed to rise (we don’t know the future), but because in an inflationary era, they act as a hedge against policy error in both directions: too lax, own bitcoin; too tight, own gold.
“The confluence of slowing economic activity, increased harvest production, and cooling commodity prices, seems to have doused inflationary concerns for the time being. The market is beginning to be encouraged that the battle against inflation is being won, and we’re near the end of the rate hike cycle. But it’s an uneasy truce.
“On the one hand, if policymakers ease off in terms of tightening measures, they will reignite inflationary pressures at a stroke. The danger is that the Fed and other central banks convince themselves that the battle has been won, and alter the direction of monetary travel, at which point inflation will just kick off again – and maybe the plentiful harvests won’t be so good next year. On the other hand, it is clear that even the current settings have provoked a major economic turndown...
“Central banks are therefore faced with the unenviable choice of collapsing the world economy, or feeding the inflation tiger. The political consequences of the former are hard to stomach, suggesting that any evidence that inflation is coming under control will be leapt upon and policies eased. Because inflation is at its core a monetary phenomenon, it will not go away under those circumstances.“
He then went on mention that earlier this year his firm — in partnership with crypto-focused regulated index provider Vinter — had launched the Vinter ByteTree BOLD Index, which “brings together these remarkable assets on an equal risk weighted basis each month.”
In April 2022, ETP provider 21Shares and ByteTree launched the “21Shares ByteTree BOLD ETP”, which Erith says is “the world’s first ETP blending bitcoin and gold” and which “seeks to serve as an inflation hedge by tracking an index that comprises bitcoin and gold and rebalances monthly according to the inverse historic volatility (360-day) of each asset.”